InvestMap: A pathway to retirement plan allocations


InvestMap: A pathway to retirement plan allocations

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Milliman’s InvestMap™ gives companies the ability to create a custom target date allocation strategy for the defined contribution plans they manage. The sophisticated tool can help boost 401(k) plan participation by allowing employees to personalize their investment approaches, and also provides a high level of fiduciary protection for the plan sponsor. Consultants Randy Mitchell and Gerald Erickson, along with several Milliman clients, discuss the benefits of InvestMap in this video.



Video transcript

Angelo Lombardi (EVP & Chief Operating Officer, La Quinta Inns): Our company revolves around our employees, and as a leadership team, our number-one job is taking care of our people. It's our number-one core value. It's what creates value for our customers, the reason they come back.

Randy Mitchell (Milliman Principal, InvestMap Product Manager): I think most companies are concerned about their employees’ welfare. They have to maintain their employee morale, for one, but on the other hand, it's good business to watch out for your employees.

Dixie Sweeney (VP OF Compensation & Benefits, La Quinta Inns): I like working for a company where we walk the talk. It isn't just words; it's what's in our heart. And when we look at the employees and we make the decisions in the 401(k) committee, we are really thinking about those employees. So having the courage to bank those decisions and make change happen is what La Quinta is about.

Gerald Erickson (Milliman Principal & Benefits Consultant): Human resources departments, benefits managers, they are being asked to do a lot more with less, and they are relying more on their partners, their record keepers, their administrators to help them come up with effective solutions.
Angelo Lombardi: So as a company, it's our responsibility for our employees and for their security to have the best possible 401(k) program we could have.

Jim Hynes (Executive Administrator, Pipe Trade Services MN): The dynamic of people not only living longer but retiring earlier and living longer, that's quite an amazing exercise when you sit down with somebody and show them how much money they need to have in order to draw an income stream over a long period of time. It's an eye-opener for the participants.

Randy Mitchell: Participants for a long time had not been cognizant of how much they need to save. It's a large dollar amount that they need to come up with, and kind of wrapping your hands around that is a difficult thing for many participants.

Jason Haynes (General Manager, La Quinta Inns, Denton, TX): I signed up with the 401(k) a couple months ago and for the longest time it was something that I'd been putting off. And my parents always told me when I was younger, even in my college days, "You've got to get your 401(k) started." And, you know, I'm young, I'll do it later.

Gerald Erickson: Participants, people do put things off. Inertia is a big problem within defined contribution plans. It's one of the challenges that all of us face in this industry, and the solution that we need to find is how to better engage participants, and in lieu of that, ensure we find a solution to help them along the way if they can't do it themselves.

Angelo Lombardi: We've worked through many applications here, from default funds to target dates. As we continue to widen offerings in our 401(k), we realize how many nuances there were to someone's investment. How aggressive are you? How much money do you have? What other investments do you have? What is your lifestyle? And it really isn't a one-size-fits-all.

Randy Mitchell: Target date funds had always been around, but they just became popular starting in about 2006, but target date options don't allow participants to pick the risk. You can't change the risk of a target date fund.

Gerald Erickson: Target date funds conceptually are a good idea. We saw a problem with them coming out of the 2008 recession because participants thought they were safe from risk, which did not turn out to be the case. I mean high exposure to equities. They're not very transparent. It's hard to see where the underlying problems are from an investment management standpoint. You have no cost control over some of these funds. And so we looked at it and thought we had a better idea on how to construct a target date fund using core funds and building a glide path.

Jim Hynes: Milliman brought InvestMap to us about two years ago as they were first developing it, and when we made the change, it was a little over 4,000 members who were allocated into InvestMap, and that was about a year ago, and 95 percent of those are still in InvestMap, which is a great number. Tells me that that's working and people are comfortable with it.

Randy Mitchell: Participants typically won't do much once they're given a choice. I mean, in fact, the more choices you give a participant, the less likely it is they're going to make a decision on what to do. So with InvestMap, for instance, the decision is, "Yes, I want to be on the glide path to a less risky portfolio over time," and that's it.

Jim Hynes: It takes care of the problem of inertia where somebody makes a choice and doesn't ever change. In InvestMap, that actually is okay that you make that choice, and it's going to move. If you made a choice at 25, when you're at 30 and 33 and 35, it's moving along with you each and every year. So you're in an investment that is going to age with you.

Dixie Sweeney: One of the nice things about InvestMap is it gives you guidance. It will show you how you would be invested for someone your age, or you can take that information you have and design your own program as to how you particularly want to have your funds invested.

Angelo Lombardi: The automatic rebalancing effect is a big deal. No one likes to lose money, and when you're not paying attention to it, when you're not managing it, or when you're wrong and you try to time the market or you don't understand the fundamentals, you can lose an awful lot of money, and it takes a long time to build it back. So if you can rebalance, if you can minimize your risk, take advantage of the stability and the long-term gains in the market, it can make a huge difference.

Randy Mitchell: InvestMap is flexible in the way that it uses the underlying investment options. We have clients whose outside advisors help them select and monitor these options, and InvestMap fits very neatly within that structure. And we also have clients where Milliman helps select those underlying investment options, and InvestMap works very easily in that environment, as well.

Jim Hynes: Another thing that InvestMap provides is a real level of comfort not only for myself, but I have a board of directors that oversees the plan, and we're all fiduciaries of the plan, meaning we have to act solely and exclusively for the best interest of the plan participants, and InvestMap really helps us do that by giving the participants an asset allocation that rebalances without additional fees. It really is kind of a one-stop shop that provides what our members need.

Gerald Erickson: InvestMap allows them to have the flexibility to use the best investment options that are out there, construct a good portfolio, watch costs, control costs, and give them the ability to bring a better solution to their plan participants.

Dixie Sweeney: And now we see that people are getting a much larger overall rate of return from their investment, so they are getting more value, and that value is coming directly from InvestMap.

Jason Haynes: It's always good to know that your money is being taken care of versus the unknown factor of it's just out there writing its own course and you don't know where it's going.

Angelo Lombardi: One of the things we want to do is assure our employees. We want them to be settled in, want them to be optimistic, and InvestMap does that. When you know that someone who really understands your investment is looking out for you, you feel better about increasing your withdrawals. By putting more money away, and you can watch that money grow. I've seen nothing but optimism about the program.

Dixie Sweeney: We've looked at all the different business models that are out there for how you can manage a 401(k) plan, and we feel like we get the best fiduciary protection and we get the best for our employees. And at the end of the day, that's what we're spending the money for.

Jim Hynes: Milliman has been a great partner. In every business, I say that it is first about relationships. Everything can be commoditized, and price is a part of the equation, but really, it's about relationships, somebody who wants to really be a partner and understand what we do, and I want to understand what they do.

Gerald Erickson: The biggest satisfaction you could have working with clients is to see their happiness and in a very collaborative manner. This wasn't something that we just did and said, "You should use it." It was very much discussed well in advanced, went through a lot of the planning process to make sure we knew what objectives they were trying to meet, and we deployed it, and it was very successful.